On August 16th Quiho 360 (QIHU) debuted its a search engine in China, and this search engine has been a key reason Baidu (BIDU) stock has been under pressure this year. Baidu is the dominant search engine in China, but Quihu is going to take a piece of the pie. With BIDU shares down on the story, we need to keep an eye on QIHU as a stock to buy. Here’s our first look at QIHU.
One Year Chart
The past year has been great for QIHU, but estimates for the next two quarters look bad. I think that’s why the stock is down in the face of positive reviews for its search engine.
What’s more concerning is profit estimates are slipping badly. Two quarters ago QIHU was supposed to make $1.34 next year (2013). Now that number is only $1.08. I thought the new search engine was going to be great for profits? Why are estimates falling?
I don’t even want to know why estimates are falling. The fact they are make it hard for this stock to be a stock market leader. Very hard.
Also, quarterly estimates — which you can see in the Earnings Table — look bad for the next three quarters. These figures have also declined recently.
Fair Value
With the issues with profitability, I have to say QIHU is worth around 30 times earnings. That’s around where the stock is now. I was hoping to say this stock was worth 45 times earnings.
Sharek’s Take
It sucks that profit estimates are falling. Otherwise this stock would be a great one to get into. I really thought I was going to buy QIHU after doing this research, but there’s way too much red in the Earnings Table.
Another negative is this company used to beat the street by a wide margin (by 6 cents each 4QtrsAgo and 3QtrsAgo) and then last quarter the company just met estimates.
This stock has to stay on the radar. If it dips to $15 perhaps we could pick it up at that price, but I really want to wait until profit estimates start to rise.
View the Earnings Table here.View the Ten Year Chart here.
